Report: State must expand Medicaid to avoid failure of managed care

DOVER — A new report is urging New Hampshire lawmakers to expand Medicaid coverage to people made eligible by the Affordable Care Act or risk sinking the state's fledgling managed care system.

New Hampshire is transitioning all Medicaid beneficiaries to a new system in which benefits are administered by three private companies.

State lawmakers ordered the change last year, hoping to reap millions in health care savings. The system is set to go live in January.

According to a report released Wednesday by the New Hampshire Fiscal Policy Institute, the success of managed care in New Hampshire is "largely dependent" on the state taking part in a federally mandated expansion of Medicaid. That's because it would deliver as many as 36,000 new clients to the vendors operating New Hampshire's Medicaid system, who are paid a monthly sum for each person they enroll.

"The managed care organizations ... expect to see a substantial increase in the populations for which they are receiving monthly payments," the report states. "In the absence of such an increase, the initiative may not be financially viable for these carriers."

Under the Affordable Care Act, the Medicaid coverage pool is set to expand in 2014 to encompass all adults under 65 who earn about $15,000 per year or less. To encourage states to expand Medicaid coverage, the federal government is planning to subsidize the lion's share of the expansion costs.

As an enticement to cooperate, the Affordable Care Act was also designed to allow the federal government to withhold all Medicaid funding from states that did not abide by the new eligibility rules. However, the U.S. Supreme Court struck down that plan this summer, ruling it was unconstitutional.

State lawmakers now have a choice regarding whether to cover the newly eligible Medicaid beneficiaries. Opting in would make the state eligible for more than $1 billion in federal funds between 2014 and the end of the decade — money that would serve as a boon to local health care providers and provide thousands of low-income New Hampshire residents with coverage.

Between 2014 and 2020, the federal government would pay 95 percent of the costs associated with expanding New Hampshire's Medicaid program, according to the report. The total cost to the state during the same time period would be approximately $129 million.

The costs would be offset in part "and possibly, in whole" by savings elsewhere in the state budget, the report states. For example, if more people were covered by Medicaid, the state could conceivably lower its payments to hospitals for care they provide to the uninsured.

New Hampshire could reduce uncompensated care payments by an estimated $85 million to $171 million between 2014 and 2020 as a result of the Medicaid expansion, according to the report. State spending could also be lowered in areas such as mental health and substance abuse services, it says.

The pool of Medicaid beneficiaries in the state would grow by about 25 percent under the terms spelled out in the Affordable Care Act. Given the relatively small size of the state's existing Medicaid population, the three companies operating New Hampshire's care management system will see their profits rise and fall based on whether the state goes along with the expansion plan.

"Without the Medicaid expansion population, it may be difficult for all three of the (managed care organizations) to participate in the initiative," the report warns. "This could, in turn, create difficulties for the broader care management program, since federal law requires the state to offer Medicaid members a choice of no fewer than two managed care organizations under the managed care model New Hampshire has chosen.

"If the state were unable to maintain the participation of two managed care organizations, it would have to reconsider the model of managed care it will employ or pursue federal waivers to suspend the choice of vendor requirement. This may jeopardize the long-term savings that managed care could potentially achieve."